OpenEdge Blog

Will Increasing Minimum Wages Mean a Demand for Solutions That “Do More With Less?”

The following article by OpenEdge Marketing Director, Richard Livingston, was originally published in Business Solutions Magazine in 2015.

Let’s engage in a thought exercise. We’re going to examine the business and technology consequences of a single grass roots movement and what it may mean for point-of-sale developers and providers. Fast food workers, demanding pay up to $15 an hour, have seen successes in New York State and some municipalities, resulting in substantial wage increases. These mandates, at this moment, apply to the narrowest sliver of the workforce – only fast food workers employed by large-scale chain establishments.

How long can the argument remain restricted to only one sector of the economy? If the minimum wage applies to restaurants with 30 locations, then why not 29? Does a grill cook deserve the wage while a big box retail staffer does not? Tough questions that, with the passing of new wage rulings, will undoubtedly be asked soon. The answers will have profound consequences for the economy and for the POS market in particular. Employers, facing skyrocketing costs, will have no choice but to drastically alter business models. Here are a few possible outcomes…

Spin Offs. Legislators will define which companies are and are not required to pay workers more. In New York, that definition included the number of locations operated. A chain with 29 restaurants is omitted from the law, while an operation with 30 national sites will pay its people significantly more. Analysts predict this will entice some larger chains to “spin off” sub-brands in which the business model is similar but legally separate. THE OPPORTUNITY: New business spin offs mean new POS requirements. This reality opens the door for more providers to pitch and sell their solutions to new entities created in the wake of wage requirements.

Consumer Shift. If large scale chains spin off and change their operational models, well-established brands will be diluted. Loyal customers may take their dollars elsewhere, leading to the growth of smaller competitors unaffected by the wage rulings. THE OPPORTUNITY: Smaller restaurants flush with new customers will require POS solutions. The same opportunity created by spin off brands will drive POS sales as diners shift from restaurant A to restaurant B.

Off-Site Food Preparation. Businesses, faced with higher personnel costs, will strive to reduce overhead. In fast food, with its established, standardized menus, the simplest solution could be to shift food preparation to regional off-site kitchens. THE OPPORTUNITY: Centralized food production will spawn tighter links between ordering, delivery and inventory. Systems able to seamlessly marry theses functions will be in high demand.

New Payment Flows. Some operations may find loopholes beyond the number of locations or head count. Another characteristic of fast food, as defined by law makers, is that it employs a pay-at-the-counter model. It’s entirely feasible that, to avoid the wage requirement, your favorite burger chain may switch to a payment flow in which the diner pays at the table, after the meal. THE OPPORTUNITY: Such a change would require significant workflow updates. How might ordering and payment look in such a scenario? POS providers can help answer that question, developing systems to work in the new paradigm.

Push-Button Ordering. The most obvious response to reduce overhead in a fast food setting would be the establishment of kiosk-based, unattended ordering. Kiosks are common in many settings today and wage increases may pave the way for proliferation and innovation. Indeed, a significant portion of meal ordering may move outside the restaurant altogether as consumers use their mobile devices, then pay with established methods like Apple Pay, Samsung Pay or Android Pay to complete the task. THE OPPORTUNITY: By combining kiosk or mobile ordering with Internet of Things (IoT) food preparation, we could see a day when simple menus are prepared in real time, in automated kitchens with minimal manpower. Systems developers will have ample chance to help define how that future might look.

Given the myriad efficiencies POS providers can bring to market, will industries impacted by wage increases leverage technology to solve what (on paper, at least) presents as a balance sheet problem? Understand that the purpose of these predictions is not to weigh the relative value of paying a fast food employee – or any worker, for that matter – a particular wage or replacing some responsibilities with technology. At least for today, it remains only a thought exercise.